Report of Independent Auditors

Transcription

1 BuildinCJ a better working world Er11\t K Yuunq lt(i_ J Rr rrnurhallcl f~uuct ll.rrlrillo" Hlvl Ofl, n;. rnud<i I' 0, HIJY '1 hj llurlllllollllt4 UX, IJ<'I nrurl.r l!.!l' 'j 111,)9'J 70t11) fd(, 1 I IIII I FI'J<,tq l VIVI\'I,CY curn/brrrnfld,l Report of Independent Auditors Board of Directors Catalyst Re International Ltd. We have audited the accompanying condensed financial statements of Catalyst Re International Ltd., which comprise the condensed balance sheet as of December 31, 2016, and the related condensed statement of income and condensed statement of capital and surplus for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Condensed Financial Statements Management is responsible for the preparation and fair presentation of the condensed financial statements based on the financial reporting provisions of The Insurance Act 1978, amendments thereto and the Insurance Account Rules 2016 with respect to Condensed General Purpose Financial Statements (the "Legislation"). Management is also responsible for the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these condensed financial statements based on our audit. We conducted our audit in accordance with International Standards of Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the condensed financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the condensed financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the condensed financial statements, whether du.e to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the condensed financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the condensed financia I statements.

2 B Iii ding <1 betler 11/0fkin') WOI ld We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion on Condensed Financial Statements In our opinion, the condensed financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2016, and the results of its operations for the year then ended, in accordance with the financial reporting provisions of the Legislation described in Note 3. ts~-~nl-&i July 26, 2017 Cha1tered Professional Accountants 2

3 I CONDENSED CONSOLIDATED BALANCE SHEET As at expressed In 0 December 31, 201 G!United States Dollars LtNE No. 1. CASH AND CASH EQUIVALENTS L ;2~o1~s ~l ~I --~2o~1~s--~ 85, I ,307 I 2. (e) (f) QUOTED INVESTMENTS: Bonds and Debentures i. Held to maturity n. Other Total Bonds and Debentures Equities i. Common stocks il Preferred stocks iii. Mutual funds Total equilies Olhar quoted investments Tala! quoted Investments il t-/ ---j 3. (e) (f) 4. (e) (f) (g) (h) 5. UNQUOTED INVESTMENTS: Bonds and Debentures L Held to maturity ii. Other Total Bonds and Debentures Equilies i. Common stocks ii. Preferred stocks ill. Mutual funds Total equities Other unquoted investments Total unquoted investments INVESTMENTS IN AND ADVANCES TO AFFILIATES Unregulated enlilies that conduct ancillary services Unregulated non-fi nancial operaling entities Unregulated financial oparaling entities Regulated non-insurance financial operating entities Regulated insurance financial operaling entitles Total investments in affiliates Advances to affiliates Total investments In and advances to affilia tes INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE: Firsl fiens Other lhan firsl liens Total investments in mortgage loans on real estate 1----ll ~ j ,47o I , l,,l--- --l ,329, POLICY LOANS 7. (a] REAL ESTATE: Occupied by the company (less encumbrances) Other properties (less encumbrances) Total real estate 1----ljt--j - --l 8. COLLATERAL LOANS 9. INVESTMENT INCOME DUE AND ACCRUED (a] (e) (C) (e) (f) (g) (h) ACCOUNTS AND PREMIUMS RECEIVABLE: In course of collection Deferred- not yet due Receivables from retrocessional contracts Total accounts and premiums receivable REINSURANCE BALANCES RECEIVABLE: Foreign affiliales Domestic affiliates Pools & associations All a/her insurers Total reinsurance balance receivable FUNDS HELD BY CEDING REINSURERS SUNDRY ASSETS: Derivati ve instruments Segregated accoun/s companies - tong-term business - variable annuities Segregated accounts companies - long-term business - other Segregated accounts companies ~ general business Deposit asse ts Deferred acquisition costs Net receivables for investments sold I Unrealized gain on reinsurance contracls ,476, , t

4 CONDENSED CONSOLIDATED BALANCE SHEET As al e.xpressed in LINE No. (ij 01 (k) 14. (e) December 31, 2016 I United States Dollars LETTERS OF CREDIT, GUARANTEES AND OTHER INSTRUMENTS Letters of credit Guarantees Other instrumen ts Total letters of credit, guarantees and other instruments a a ,754, TOTAL TOTAL INSURANCE RESERVES, OTHER LIABILITIES AND STATUTORY CAPITAL AND SURPLUS UNEARNED PREMIUM RESERVE Gross unearn ed premium reserves Less: Ceded unearned premium reserve i. Foreign affiliates ii. Domestic affiliates ill. Pools & associations iv. All other insurers Total ceded unearned premium reserve Net unearned premium reserve LOSS AND LOSS EXPENSE PROVISIONS: Gross loss and loss expense provisions Less : Reinsurance recoverable balance i. Foreign affiliates ii. Domes lie affiliates iii. Pools & associations lv. All other reinsurers Total reinsurance recoverable balance Net loss and loss expense provisions ,378, OTHER GENERAL BUSINESS INSURANCE RESERVES 19. TOTAL GENERAL BUSINESS INSURANCE RESERVES LONG-TERM BUSINESS INSURANCE RESERVES 20. RESERVE FOR REPORTED CLAIMS 21. RESERVE FOR UNREPORTED CLAIMS 22. POLICY RESERVES - LIFE 23_ POLICY RESERVES- ACCIDE NT AND HEALTH 24. POLICYHOLDERS' FUNDS ON DEPOSIT 25. LIAB ILITY FOR FUTURE POLICYHOLDERS' DIVIDENDS 26. OTHER LONG-TERM BUSINESS INSURANCE RESERVES 27. TOTAL LONG-TERM BUSI NESS INSURANCE RESERVES Total Gross Long-Term Business Insurance Reserves Less: Reinsurance recoverable balance on long-term business (ij Foreign Affiliates (n) Domestic Affiliaties (iii) Pools and Associations (iv) All Other Insurers Total Reinsurance Recoverable Balance Total Net Long. Term Business Insurance Reserves OTHER LIABILITIES!-----ill f l 28. INSURANCE AND REINSURANCE BALANCES PAYABLE 29. COMMISSIONS, EXPENSES, FEES AND TAXES PAYABLE 30. LOANS AND NOTES PAYABLE 31. INCOME TA XES PAYABLE DEFERRED INCOME TAXES 32. AMOUNTS DUE TO AFFILIATES 33. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 34 FUNDS HELD UNDER REINSURANCE CONTRACTS: 230,21 1,oas I 21 1, I 97,2791

5 I ~- - -~~- - CONDENSED CONSOLIDATED BALANCE SHEET '. As at Decembor 31, 2016 expressed in I United States Dollars LINE No II DIVIDENDS PAYABLE 36. SUNDRY LIABILITIES: ,428 (e) ,641 (f) (g) (h) ,482, LETTERS OF CREDIT, GUARANTEES AND OTHER INSTRUMENTS: Lellers of credit Guarantees Other instruments Total tellers of credit, guarantees and other Instruments 38. TOTAL OTHER LIABILITIES TOTAL INSURANCE RESERVES AND OTHER LIABILITIES 773,942, CAPITAL AND SURPLUS 40. TOTAL CAPITAL AND SURPLUS 83,172,378 71,669, TOTAL ,378,286

6 CONDENSED CONSOLIDATED STATEMENT OF INCOME CATALYST RE INTERNATIONAL LTD. As at December 31, 2016 expressed In United States Dollars LINE No. GENERAL BUSINESS UNDERWRITING INCOME '----"2o.:.;1:..::s,l._I --=z-=-o1:..::5, 1. GROSS PREMIUMS WRITIEN Direct gross premiums wrttten Assumed gross premiums written Total gross premiums wrilten I-----ll REINSURANCE PREMIUMS CEDED 3. NET PREMIUMS WRITIEN 4. INCREASE (DECREASE) IN UNEARNED PREMIUMS 5. NET PREMIUMS EARNED 6. OTHERINSURANCEINCOME 7. TOTAL GENERAL BUSINESS UNDERWRITING INCOME GENERAL BUSINESS UNDERWRITING EXPENSES 8. INCURRED 9. COMMISSIONS AND BROKERAGE 10. TOTAL GENERAL BUSINESS UNDERWRITING EXPENSES 11 NET UNDERWRITING PROFIT (LOSS) - GENERAL BUSINESS LONG-TERM BUSINESS INCOME 12. GROSS PREMIUMS AND OTHER CONSIDERATIONS: Direct gross premiums and other considerations Assumed gross premiums and other consideralions Total gross premiums and other considerations ~-----~11~ PREMIUMS CEDED NET PREMIUMS AND OTHER CONSIDERA l ions: Life Annuities Accident and health Total net premiums and other consideralions OTHER INSURANCE INCOME 12, 133,717 I TOTAL LONG-TERM BUSINESS INCOME LONG-TERM BUSINESS DEDUCTIONS AND EXPENSES 17. CLAIMS - LIFE 18. POLICYHOLDERS' DIVIDENDS 19, SURRENDERS 20. MATURITIES 21. ANNUITIES 22. ACCIDENT AND HEALTH BENEFITS 23. COMMISSIONS 213,646 I 24. OTHER 25. TOTAL LONG-TERM BUSINESS DEDUCTIONS AND EXPENSES INCREASE (DECREASE) IN POLICY RESERVES (ACTUARIAL LIABILITIES): Life Annuities Accident and health Total increase (decrease) in policy resenes 27. TOTAL LONG-TERM BUSINESS EXPENSES 213, NET UNDERWRITING PROFIT (LOSS)- LONG-TERM BUSINESS 11,920,071 17,074, COMBINED NET UNDERWRITING RESULTS BEFORE THE UNDERNOTED ITEMS

7 I ' CONDENSED CONSOLIDATED STATEMENT OF INCOME CATALYST RE INTERNATIONAL LTD. As at December 31, expressed In United States Dollars LINE No I I 2016 UNDERN OTED ITEMS a a 30. COMBINED OPERATING EXPENSE General and adminlslralion Personnel cost Other Total combined operating expenses COMBINED INVESTMENT INCOME NET 32. COMBINED OTHER INCOME (DEDUCTIONS) 33. COMBINED INCOME BEFORE TAXES 11.soz,Jeo COMB INED INCOME TAXES (IF APPLICABLE~ Current Deferred Total 36. COMBINED INCOME BEFORE REALIZED GAINS (LOSSES) 11,502,380 16,762, COMBINED REALIZED GA INS (LOSSES) 37. COMBINED INTEREST CHARGES 30. NET INCOME ,762,674 II

8 CONDENSED CONSOLIDATED STATEMENT OF CAPITAL AND SURPLUS CATALYST RE INTERNATIONAL LTD. As at December 31, 2016 expressed In United States Dollars LINE No. 1. CAPITAL: Capilal Slock (i) Common Srh'-'a"'re,s' aulhorized I I shares of par value. each issued and fully paid. shares 1.ooo.ooo I 1.ooo.ooo I (n) (A) Prererred.rs"'h"'ar"'e-"'s:~------, authorized I I share_. or par value.. each 1ssued and fully paid shares aggregate liquidation value for - ;~::1 I (B) Preferred shares issued b a subsidiary: authorized shares of par value each issued and fully paid shares aggregate liquidation value for- ~~:~1 I (iii) Treasury f's"-'ha.,r"es..., repurchased'!shares of par value.. each Issued Contributed surplus Any other fixed capllal (i) Hybrid capilallnslrumenls (li) Guarantees and others (iiq Total any other fixed capital 31.ooo,ooo I 31,ooo,ooo I llll-----l Total Capital 32,000,000 32,000, SURPLUS: Surplus- Beginning of Year 39,669,998 I 22, I Add: Income for the year 11,502,360 16,762,674 Less: Dividends paid and payable Add (Deduct) change in unrealized appreciation (depreciation) of investments (e) Add (Deduct) change in any other surplus (f) Surplus - End of Year 3. MINORITY INTEREST 4. TOTAL CAPITAL AND SURPLUS

9 Schedule X NOTES TO CONDENSED CONSOLIDATED GENERAL PURPOSE FINANCIAL STATEMENTS Matters to be set forth in a General Note to the Financial Statements 1. The Company is a wholly-owned su bsidiary of Genefmance which is incorporated in France. The ultimate beneficial owner company is Societe Generale, a French banking corporation, which a public company is quoted on the Paris Bourse and on the Tokyo stock exchange. The shares of Societe Generale are also traded in the United States under an American Depository Receipt (ADR) program. The Company was incorporated in Bermuda on November 27, The Company en tered into a keepwell agreement with Societe Generale for maintenance of the minimum capital requirement. 2. The general nature of the risks underwritten by the insurer. The Company's reinsurance product is structured to provide for payment of guaranteed minimum death benefits ("GMDB") and redu ce exposure for direct writers and reinsurers of this type of risk. The Company has entered into various indemnity reinsurance agreements with Tokio Marine & Nichido Financial Life Insurance Co. Ltd ("Tokio Marine"), Meiji Yasuda Life Insurance Company ("Meiji"), Dai-ichi Frontier Life Insu rance Co. Ltd ("Da-ichi"), Mitsui Sumitomo Primary Life Insurance Company, Limited ("Mitsui"), Taiping Reinsurance Company Limited (Taiping Re) and Peak Reinsurance Company Limited (Peak Re). The Company has also entered into various separate Index Linked Swap agreements (the "Derivatives") with Societe Generale to h edge the economic risk of the above agreements. Under those agreements, the Company is retroceding to Societe Generale 100% of the mal'ket risks embedded in the reinsurance treaties, while retaining the actuarial risks (including mortality and lapse). Name Company Effective date Tokio Marine # 1 Tokio Marine March 1, 2007 Tokio Marine #3 Tokio Marine December 1, 2007 Tokio Marine #4 Tokio Marine March 1, 2008 Tokio Marine 115 To\<:io Marine July 1, 2008 Tokio Marine #6 Tokio Marine September 1, 2008 Meiji Yasuda II 1 Meiji November 1, 2009 Meiji Yasuda 112 Meiji November 8, 2010 Meiji Yasuda #3 Meiji November Maiji Yasuda #4 Meiji November 1, 2012 Dai-ichi Ill Da-ichi March 1, 2010 Dai-ichi #2 Da-ichi March 3 1, 2011 Dai-ichi #3 (tranche 1) Da-ichi September 2, 2013 Dai-ichi #3 (tranche 2) Da-ichi January 1, 2014 Dai-ichi #3 (tranche 3) Da-ichi April Dai-ichi #3 (tranche 4) Da-ichi July 1, 2014 Dai-ichi #3 (tranche 5) Da-ichi October Dai-ichi #3 (tranche 6) Da-ichi January 1, 2015 DIFL6 Da-ichi May 8, 2015 DFLPJ 15Y Da-ichi February 2, 2015 DFLPJ 20Y Da-ichi February 2, 2015 Mitsui # 1 Mitsui April 21, 2011 Mitsui #2 Mitsui April Mitsui JP Mitsui July 10, 2015 Mitsui JP Mitsui July 10, 2015 Taiping Re Taiping Re February, Peak Re Peak Re December18,

10 The Company entered into a Service Level Agreement with Societe Generate Paris whereby the Company agrees to provide certain administrative and accounting services on behalf of Societe Generate Paris of which the company will be compensated with a sum equal to the cost of the services provided, increased by a 5% mark up. Catalyst Re International Ltd, registered as a segregated accounts company in Bermuda tmder the Segregated Account Company Act 2000, has the ability to create segregated accounts on its balance sheet whose assets and liabilities are fully separated from the assets and liabilities of its general account. Whereas Catalyst Re 's variable annuity reinsurance business is underwritten from its general account, its new macro-longevity risk transfer business is conducted through dedicated segregated accounts for each transaction in order to facilitate termination mechanisms in case of early termination events. In December 2013, four segregated accounts were created to transfer longevity risk from Blue Square Re, a subsidiary of Aegon, NV (the "Sponsor") to SCOR Global Life Reinsurance Ireland Limited and Challenger Life Company Limited. The' transaction had a 22 year maturity, and hedged the Sponsor for 200 million euros of protection in case of significant increase in the Dutch population life expectancy or significant decrease in the United States population life expectancy. The transaction was structured in back-to-back leaving no risks on the segregated accounts' books. On 2015, Catalyst Re International Ltd. entered into two Reinsurance Agreements whereby its counterpar.ties are reinsuring some Death Benefits and Maturity Benefits on a pool of policies initially reinsured by Catalyst Re International Ltd., against payment of an upfront premium. The first agreement, with Taiping Reinsurance Company Limited, is effective since February 25th, 2015, and has a total size of US$100 million. The second agreement, effective from December 18th, 2015, has been traded with Peale Reinsurance Company Limited for a total size of US$65 million. The Reinsurance Agreements h ave a five years maturity. Both agreements are covered by a collateral pledge agreement for the benefit of Catalyst Re Interna tional Ltd. The pledge is done through Euroclear. 3. The accounting standards and principles on which the condensed financial statements are based; The condensed general purpose financial statements have been prepared in conformity with the financial reporting provisions of the Insurance Act 1978, amendments thereto and the Insurance Account Rules 2016 with respect to Condensed General Purpose Financial Statements (the "Legislation"). The condensed general purpose fmancial statements are based on International Financial Reporting Standards ("IFRS") but are in accordance with the reporting requirements of the Legislation which varies in certain respects from!frs. a) Reinsurance contracts and Retrocession contracts The Company has entered into various reinsurance and retrocession agreements, as discussed in Note 2, which are accounted for as derivatives and are carried at fair value. The Company has obtained a Section 56 Direction from the Bermuda Monetary Authority ("BMA") allowing the Company to account for the contracts in accordance with International Financial Reporting Standards ("IFRS") as derivative contracts rather than insurance contracts. The fair value is obtained from an Societe Generate internally developed pricing model which utilizes both observable and non-observable parameters. Unrealized gains on these agreements are presented in sundry assets on the statutory balance sheet, whereas unrealized losses are reflected in sundry liabilities. Changes in unrealized gains (losses) are included in Form 8 Line 2. The Company has entered into Derivatives, a s discussed in General Note 2, which hedge the economic risk of the insurance and retrocession agreements. The Derivatives are carried at fair value. The fair value of these Derivatives is also obtained from a Societe Generate internally developed pricing model which utilizes both observable and non-observable parameters. Unrealized gains on the Derivatives are presented in investment in and advances to affiliates on the statutory balance sheet, whereas unrealized losses are reflected in amounts due to affiliates. Changes in unrealized gains (losses) are included in Form 8 Line 2. 2

11 b) Cash and time deposits Cash and time deposits represent cash in a bank. c) Income Taxes As a Company organized under the laws of Bermuda, the Company is not subject to taxation in Bermuda, as Bermuda does not impose any form of taxation on receipts, dividends, capital gains, gifts or net income. In the event that such taxes are levied, the Company has received an assurance from the Bermuda government to be exempted from all such taxes until March 31, The accounting policies of the insurer, any significant change made during the relevant year to such policies and the effect, if any, of changes to the information contained in the financial statements. There were no changes during the year. 5. The basis of recognition of premium, investment and commission income. Premium and commission income Investment income Investment Income is recorded on an accrual basis 6. The method used to translate amounts denominated in currencies other than the currency of the financial statements, the amounts, if material, gained or lost on such translation and the manner in which those gains or losses are treated in those statements. Foreign currency transactions are translated to United States dollars at the rates of exchange prevailing on the dates of the transactions. Assets and liabilities denominated in foreign currencies are translated at year-end rate. Exchange gains/losses are recorded on line 37 of the statutory statement of income. 7. Any foreign exchange control restrictions affecting assets of the insurer, with particular reference to money balances which cannot be transferred to the insurer due to reasons unrelated to the insurance business conducted by the insurer 8. The nature and amount of any material contingencies or commitments (for example, a commitment involving an obligation requiring abnormal expenditure, pending lawsuit, or the conclusion of a long lease). 9. Any default made by the insurer in relation to the principal, interest, sinking fund or redemption provisions of any securities issue made, or any credit agreement entered into, by it. 10. The gross amount of arrears of dividends on preferred cumulative shares, and the date to which those dividends were last paid. 11. The amount of any loan made during the relevant year by the insurer, to any director or officer of the insurer, not being a loan made in the ordinary course of business. 3

12 12. The amount of any obligation in respect of retirement benefits relating to employees of the insurer arising from service prior to the end of the relevant year remaining to be charged against operations, and the basis on which the insurer proposes to charge that amount. 13. Fair value amounts for all quoted and unquoted investment lines. Fair value hierarchy of investments based on the following levels: 14. The contractual maturity profile of the insurers' fixed maturity and short-term investments: 15. Related party transaction s detailing the nature of the relations hip, description of transactions including transactions where no amounts or nominal amounts were ascribed, monetary amounts of transactions for each of the periods for which income s tatements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period, and amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, th e terms and manner of settlement. See Note Any transaction made or other event occurring between the end of the relevant year and the date of approval of the financial statements by the board of directors and materially affecting the fmancial statements, not being a transaction made or an event occurring in the ordinary course of business. 17. Any other information which in the opinion of the board of directors is required to be disclosed if the fmancial statements are not to be misleading. Matters to be set forth in Notes to the Consolidated Statement of Capital and Surplus 1 Capital Stock Authorized issued and fully paid - 1,000,000 shares of par value $ Con tributed surplus 2 Dividends paid and payable 4

13 Matters to be set forth in Notes to the Consolidated Balance Sheet - Class 3A, Class C, and Class D 1. Cash and cash equivalents Cash and time deposits represent cash in a bank free of any encumbrances. 2. Quoted investments 3. Unquoted investments 4. Investment in and advances to affiliates Investment in and advances to affiliates consists of $215,619 (2015: $322,054) due from an affiliate of the Company for the Service Level Agreements detailed in Note 2, $758,435 (2015: Nil) due from an affiliate company, $501,007,415 (2015: $229,963,688) being amount due from the parent for the Derivative as detailed in Note 2 and $Nil (2015: $43,998) being payments made on behalf of an affiliate. Please refer to Note 2 above for valuation method used to value derivatives. Other balances are recorded at Cost and settlements are due upon request. 5. Investments in mortgage loans on real estate 6. Policy loans 7. Real estate 8. Collateralloans Not Applicable 9. Investment income due and accrued 10. Accounts and premiums receivable 11. Reinsurance balances receivable 12. Funds held by ceding reinsurers 13. Sundry assets $227,390,631 (2015: $219,278,090)- This amount represents net unrealized gains under the reinsurance agreements with Tokio Marine, Dai!chi, Taiping Re and Peak Re as noted in Part l, Note 2 and Note 3. $41,839,256 (2015:$6,476,148) represents net unrealized gains with respect to segregated accounts that were created to transfer longevity risk from Blue Square Re, a subsidiary of Aegon, NV as noted in Part I, Note 2 and Note 3{a) 5

14 14. Letters o[ credit, guarantees and other 16. Unearned premium reserve 17. Loss and loss expense provisions 20. Reserves for reported claims 21. Reserves for unreported claims Not appucable 22. Policy reserves - life 23. Policy reserves accident and health 24. Policyholders' funds on deposit 25. Liability for future policyholders' dividends 26. Other insurance reserves - long term 27. Totallong-tenn business insurance reserves 28. Insurance and reinsurance balances payable 29. Commissions, expenses, fees and taxes payable 30. Loans and notes payable 31. Income taxes payable Deferred income taxes 32. Amounts due to affiliates Amounts due to affiliates consist of $230,211,085 (2015: $220, 128,939) - This amount is payable to Societe Generale, under the terms of the Derivative agreements as detailed in General Note 2. 6

15 33. Accounts payable and accrued liabilities Expenses are recorded on an accruals basis. 34. Funds held under reinsurance contracts 35. Dividends payable 36. Sundry liabilities $501,007,415 (2015: $230,308,641)- This amount represents net unrealized losses under the reinsurance agreements with Mitsui, Meiji and Dai-ichi as detailed, General Note 2 and Note 3. $42,512,536 (2015: $7,173,428) represents the net unrealized losses with respect to segregated accounts that were created to transfer longevity risk from Blue Square Re, a subsidiary of Aegon,NV to SCOR Global Life Reinsurance Ireland Limited and Challenger Life Company Limited as detailed in General Note 2 and Letters of credit, guarantees and other instmments 7

16 Matters to be set forth in Notes to the Consolidated Statement of Income - Class 3A, Class C, and Class D 6. Other insurance income 15. Other insurance income Other Income of $12,133,717 (2015: $17,074,652)- This includes $307,795 (2015: $329,958) which relates to retrocession income and receivable from the Service Level Agreement as detailed in General Note 2, interest income of $2,868 (2015: $88,712), net foreign exchange loss of $60,108 (2015: $18,349), and net realized gain on periodic settlements of $11,762,946 (2015: $16,674,331). 32. Combined other income (deductions) 36. Combined realized gains (loss) 8